India’s financial markets are signaling a definitive shift in the monetary landscape. Recent data from the overnight indexed swap (OIS) market suggests that the Reserve Bank of India’s rate-cut cycle has likely concluded. Short-term rates have stabilized following the central bank’s decision on **February 6, 2026**, to maintain the repo rate at **5.25%**. While the RBI has implemented a cumulative **125 basis point** reduction since early 2025, the market is now pricing out further easing. Yield Curve Dynamics The OIS curve is experiencing a notable re-steepening. The **1-year OIS rate** currently stands at **5.50%**, which is **25 basis points** above the current repo rate. This premium indicates that traders are no longer betting on cuts and are instead beginning to factor in the possibility of a rate hike within the next **12 months**. Longer-tenor swaps are feeling upward pressure as well. The actively traded **5-year OIS** has climbed to **6.15%**, rising roughly **23 basis points** since the start of January. This movement reflects a market bracing for a transition from ultra-accommodative conditions to a more neutral environment. Growth and Inflation Outlook The hawkish tilt in swap rates is driven by a robust domestic economic trajectory. India’s real GDP growth for the **2025-26** fiscal year is now estimated at **7.4%**, up from previous projections. The outlook for early **2026-27** remains strong, with growth forecasted at **6.9%** for the first quarter and **7.0%** for the second. Inflation, while currently sitting at a low **1.3%** as of December, is expected to accelerate. Base effects and rising prices in precious metals are projected to push headline CPI to **3.2%** by March and further toward **4.2%** by mid-2026. This anticipated "U-turn" in price growth is a primary catalyst for the rising yields in longer-dated instruments. Bond Market Pressure The sovereign bond market is simultaneously grappling with a heavy supply of debt. State governments recently scheduled a massive auction of **486.15 billion rupees**, the largest weekly issuance of the year. This surge in supply has pushed the **10-year benchmark bond yield** toward the **6.80%** mark. Despite the RBI’s historical interventions—purchasing a record **6.83 trillion rupees** of debt this financial year—the lack of fresh liquidity measures in the February policy meeting has left investors cautious. The current environment favors an accrual-based strategy, as market participants align themselves with a "higher for longer" interest rate reality.